Piclo opposes distributed energy supermarket model

A centralised trading platform is “absolutely the wrong approach” for developing distributed energy markets, the head of Piclo has told Utility Week.

The company’s co-founder and chief executive, James Johnston, was commenting on Ofgem’s proposed options for developing the “world’s first distributed energy super marketplace”.

In a call for input in March, Ofgem said this marketplace would need to be underpinned by a “common digital energy infrastructure” for which it proposed three archetypes: a market directory to enable buyers and sellers to understand the markets and assets available; an exchange to coordinate otherwise separate markets and provide a “single point of truth”; and central platform for flexibility, encompassing all activities across all markets, including co-optimised clearing.

Johnston said everyone in the industry is “singing from the same hymn sheet” when it comes to the need for “better co-ordinated markets” that can “unlock revenue stacking”.

“But what we don’t want to do is just throw out all of the hard work that’s been built up over the past few years and the progress and investment going into this, and essentially put all that into hiatus to start thinking about creating one platform to rule them all.”

The Piclo Flex platform is currently used by four out of the six distribution network operators (DNOs) in Great Britain to host their flexibility tenders.

Johnston said trying to build the “perfect” platform from scratch is “absolutely the wrong approach,” adding: “What we need is to build on current practises and incrementally evolve these.”

He said there is a need for some centralised digital infrastructure and standardisation, for example, common application programming interfaces (APIs).

But Johnston said it would be better to address such issues through a “market governance framework” that requires market platforms, network and system operators, and other relevant parties to sign up to “an agreed set of rules for participation”.

He said this framework could be developed incrementally, first picking the “low-hanging fruit” before moving on to more difficult problems.

In its formal response to Ofgem’s call for input, Piclo said many of the problems the regulator’s proposals seek to address could be resolved through greater standardisation, common processes and shared market design principles.

“None of the archetypes, nor any technological solution, will resolve flexibility service providers needing to stack across multiple markets without these in place. All markets could exist in one platform and still not be able to stack through exclusivity clauses or misaligned procurement and dispatch cycles.”

Piclo said the exchange and central platform archetypes in particular risk “over-centralisation of functionality where it is not necessary.”

“This puts at risk the development of innovative value propositions for those areas and could exclude new solutions or developments from being integrated into the ecosystem and result in legacy dinosaur systems – ultimately eroding investment into the sector at this critical time,” it added.

“Equally, as more services and functionality are centralised, the scope of such an archetype becomes increasingly complex and costly to deliver.”

Piclo said its proposed alternative of a market governance framework comprising common standards, processes and protocols, could act as a “gatekeeper” for marketplaces and platforms.

“The result of this will see the regulator focusing on developing the right principles, ensuring adherence to these principles and penalising bad practices via disqualification or non-qualification,” the company explained.

“This approach will incentivise all marketplaces and buyers to work together to drive the market forward iteratively, collaboratively and at pace – with the teeth needed behind it to make this happen.”

Johnston said: “It’s still a relatively early stage idea in terms of how this could be implemented but we’re engaging with Ofgem on this topic and also our peers in the in the industry.”

Last month, Northern Powergrid signed a two-year deal with Piclo to use its platform to procure flexibility services.